- Springtime in Minnesota
That’s right! It’s finally here – SPRING! Winter sure did hold on tight this year.
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twin cities
Probably one of the last things a luxury buyer thinks about when shopping for a new home is how he is going to insure it and how much is it going to cost. One of the hardest things to figure out is WHO is going to insure it. Luxury homes are not insured by every insurance company out there, and most likely, buyers will have to choose from a small pool of companies.
For instance, Minneapolis and St. Paul have an extensive inventory of historic homes with many showcasing architectural elements that would cost a fortune to reproduce today. Sorry, but Allstate just won’t do. Buyers and home owners can’t just pick any insurance company to cover these beautiful and rare items; therefore, the best way to protect your home is to choose an insurance company that has a specific policy covering old homes. Placing a value on items can be tricky, so agents can come to your home and evaluate original stain glass windows, rare woodwork, imported tile, expensive wall coverings, stone carvings…you name it, they have the expertise to value your home’s special attributes.
The initial appraisal and inventory of your home is crucial. Agents will take photos and detailed notes of everything in your home, so that should a disaster strike, your home can be reconstructed as best as possible to its original state. Most of these special insurance companies will go above and beyond the policy to make sure your home is returned to you better than before, even updating your home to current code at no additional expense to the home owner.
Some companies that you might look into for insuring your luxury home include:
- HUB International – can quote from the Top 5 upscale insurance companies
- Fireman’s Fund
- Chubb
- AIG/Chartis
- ACE
- PURE
Many of these companies offer increased coverage for Wine Collections, Jewelry, multiple properties, flood insurance, Kidnap and Ransom, Fine Art, etc.
Home Owners, you aren’t left out of this conversation either.
Over the years, million dollar mansions are updated and improved, but many homeowners neglect to call up their insurer and inform them of the improvements, leaving their home undervalued. When disaster strikes, homeowners could find themselves in a tough place when they don’t get the correct dollar value to replace their home and personal items. It is suggested that homeowners update their policy every year to make sure they are fully covered.
And don’t let the declining real estate market, which might state the value of your home has decreased, affect the insured value of your home. Home values have little to do with how much it will cost to rebuild and replace everything lost, so don’t get caught in that trap.
A month ago I took the family out for a cold day of Minnesota ice hockey- the US Pond Hockey Championships 2011. They are held annually on Lake Nokomis. It was about 10 degrees that day, but us Minnesotans know that is the best conditions to play pond hockey, especially if the sun it out. I know what you are thinking…we must be crazy!
You have to be careful when watching the games, as a puck can come flying at you any moment. A task even more difficult when looking through a camera lens!
In light of recent experiences I have encountered with local Twin Cities home builders, I make it a point to tell buyers that they should thouroghly research any builder they might contract to build their new home. Some builders are barely keeping their business above water, and others are slowly sinking, but if you spoke with these builders, most likely they would tell you they are doing” a lot” of business. Don’t believe them. Here are some tips to consider when building a new home:
- Ask the builder how long they have been in business under the current company name.If it is a short period of time, ask them if they, or anyone involved with company, has been a builder/contractor under a different name. Believe it or not, there are some fairly sizable builders in the Twin Cities who have declared bankruptcy, gotten in trouble with the state, etc, and closed their doors, only to open up under a brand new entity name. Of course, they don’t disclose this to potential buyers.
- Ask the builder if their company name is the same as their legal corporation name. Sometimes builders “Do Business As” (DBA) a different name. You can research both names with the Minnesota Secretary of State and find out if they are in good standing.
- Ask for the Builder’s License Number. They should be able to give it to you on the spot. If they don’t, consider this a red flag. Once you have the number, research the builder with the Department of Labor and make sure their license number corresponds with what you were given. Believe it or not, some builders have been using another builders license number to pull permits, illegally of course.
- Find out who owns the company. Go to the Judicial website and see if there are any active judgments against the owner and/or the company. Pending cases brought against the builder by clients or trade professions could be a red flag.
- Ask for References. Don’t just get the good, but also ask to speak with someone who was not happy to see how the builder resolved the issue. It could give you a clue on how the builder professionally handles complaints.
- Don’t just take the builder’s word for it. I can’t tell you how many times I have been lied to by a builder as an agent, and it just makes me more mad when I meet buyers who were lied to as well. If you have contracted with a builder, make sure all permits are pulled for the work being done. Once again, some builders are doing work without a permit, and when the city finds out, and the project shuts down, the buyer is the one left in limbo. Don’t be afraid to call the city and ask them if proper permits were pulled.
- Find out who holds the escrow money. I don’t like the escrow money being held by the builder. If a builder cannot finance the permit on his own, then I question their financial standing. I have run into buyers who have had problems with builders and had to cancel the contract, only to find out the builder has spent the escrow money and doesn’t have the funds to pay the buyers back. It just turns into an awful mess. See if the money can be held by a title company.
- Don’t go with a builder just because they have a great lot. The worst thing you can do is fall in love with a lot that is owned by a builder that you are not excited about. Trust me, it is the kiss of death! I know two buyers currently (not my clients) who went with a builder because of the lot and the homes are falling apart. They were warned about the builder, but they said they would take their chances because they were so blinded by the lot.
- Don’t be afraid to ask questions. Ask everything you can think of, and don’t hold back even on the things that seem minor.
These are just a few things to think about. “Google” the builder, too, and see what pops up. For instance, a recent article in the Star Tribune highlights how some local builders have lost their license recently or been fined in the past few months.
Our Lovely Governor’s Plan
In case you haven’t heard, our new democratic governor has unveiled his budget proposal for Minnesota. The Governor’s proposal focuses largely on liberal, revenue-raising measures that unfairly target one group of people – those he considers RICH.
- His plan calls for creating a fourth tier income tax bracket at 10.95% (why not just make it 11?) for joint filers earning over $150,000 and head-of-household filers earning $130,000. (By the way, when did spouses making $150K become rich?)
- He also wants to create a “temporary” income surtax of 3% on filers earning more than $500,000 annually. Of course we all know that any tax that is touted as being only “temporary” always becomes a permanent tax.
- And probably the most ridiculous is imposing a statewide property tax on homes valued over $1 million.
It shouldn’t be any surprise to my readers that I oppose all three of these proposals. I am not rich, but I aspire to be some day through hard work. Why then should I, or anyone else who has worked hard to be successful, be punished for earning more? I constantly hear about how one class deserves more than the other, and frankly I don’t get the whole “spread the wealth” thing. I grew up lower middle class, and through hard work, my father raised us up some. He never asked for a handout, and he raised me to believe that the only one looking out for myself is me. I could never ask someone that is wealthy to give me a piece of their pie just because I don’t have any – I prefer to make my own.
So when I hear Dayton say he wants to tax the rich more because “they can afford it”, I get a little mad. At 11%, Minnesota will be one of the states with the highest tax bracket. I see luxury home property taxes all the time, and trust me, they aren’t cheap. So also increasing the property taxes on million dollar homes just pushes the knife in further for high income wage earners. With the plethora of million dollar homes available in the Twin Cities, especially around Lake Minnetonka, I can help but think that these proposals will keep the wealthy from moving to Minnesota, therefore making it harder for local home owners to sell.
I guess we will just have to wait and see what happens. The Minnesota Association of Realtors “opposes the imposition of a statewide property tax for several reasons. First, property taxes should remain a source of local government revenues and should not be expanded at a state level. Second, expanding the residential property tax to the state poses an opportunity for future expansion to other, lower-valued properties. Finally, it is the wrong time to add additional burdens to an already ailing housing market”.
The 2010 Twin Cities Real Estate Report was recently released by the Minneapolis Association of Realtors and has some fantastic data on what has been happening over the past years in the surrounding 13 county area. While this is a general overview of all real estate activity for 2010 and not a specific breakdown of the luxury home market, it provides some important insight on areas that do cater to the upper bracket real estate market.
New Listings
New listings have been decreasing over the past five years, which is really no surprise to anyone. What is interesting is that 2009 and 2010 are relatively the same for homes put on the market. I like the fact the report breaks down the top/bottom five markets for new listings. For the luxury home market, Victoria is number four for most new homes listed, and has seen a 13% increase in home prices over the last year.
New Listing Data 2010
Closed Sales
For Closed Sales in 2010, the number one area for sold homes was Victoria, with Lake Minnetonka in fifth place. Victoria’s new home construction was probably a good reason for the top ranking for nearly 30% of its 2010 closed sales were due to new construction. Lake Minnetonka on the other hand saw almost 30% of its closed inventory as foreclosure or distressed properties. The desirable area coupled with lower home prices helped the Lake Minnetonka market have a better overall year than other Twin Cities areas.
Closed Sales Data 2010
Days on the Market
One of the most important pieces of date to relay to home owners is the number of days it might take to sell their home. Known to agents as DOM, the Days on the Market helps us understand exactly what a local real estate market is doing. As you can see, when the market tanked in 2008, DOM increased dramatically. Since then, homes have been slowly seeing that time frame decline – a good thing for the overall market. Areas of Minneapolis found themselves having the shortest days to sell, most likely due to the shear volume of foreclosures in those areas. The “North” area of Minneapolis alone had 60% of its sold volume in 2010 as distressed/foreclosed properties.
2010 Days on the Market
If you would like to learn how your local real estate market performed in 2010, please feel free to send me an email!
Autumn Reflections near Red Wing
It has been really cold here in Minnesota the last few weeks, and I find myself dreaming of some warmth and color. So I thought I would post a photo I took this past fall of a picturesque scene near Red Wing, MN. No, I did not stage the hunters in the canoe. They actually startled me with their gunshots – they were hiding in the reeds hunting geese. I literally watched them shoot a couple of geese out of the sky, paddle to the birds, and pull them out of the water. As they paddled away, I took this shot. Welcome to Minnesota!
Contrary to what you might think, when you get the call from your listing agent that a buyer wants to look at your home for sale, the buyer already knows what your home looks like. They have toured it, peeked in the windows, driven by it at night, walked through your bedroom – you name it, they’ve done it. Surprised?
Today’s real estate market is shopped by buyers from the convenience of their living room couch, from their office, or on their lunch break. In fact over 45% of Minnesota buyers, according to a survey conducted by the Minnesota Association of Realtors, found their home on the Internet. Buyers are touring your home before they even make the call, so in this case, don’t you think it best to put your best foot forward from the very beginning?
I recently wrote about the old saying, “You never get a second chance to make a good first impression”, which was in relation to how you have a buyer enter your home. This can also hold true for photography. So many times I see photos like the one below of a multi-million dollar home ( in the photo below, the home is listed for sale at $2.9 Million) where the lazy real estate agent has gone in with a point and shoot camera and done the work themselves. Sadly, high-end buyers are going to pass this home up when they are searching online because it doesn’t grab their attention. Instead of seeing the beautiful architectural and historical details of the home, they see a lop-sided photo of some wood and a partial table.
Example of a bad MLS photo of home currently for sale in the Twin Cities
As a seller, you would think you would be pretty upset to find out your agent is marketing your property in this manner. But believe it or not, I find that in most instances where I ask a seller whose home has not sold, to take a look at the photos in MLS, the first thing they say is that they have never seen the photos of their home. What? A good real estate agent should be showing a seller their marketing pieces, and as a million dollar listing, a good real estate agent should be having a professional photograph the home. Sellers have only one chance to grab a buyers attention, so proper angles and lighting are extremely important to highlight every detail of the listing.
When it comes time to sell your home, please make sure you choose an agent who specializes in luxury home marketing. It’s not about selling your home, it’s about marketing your home. Any agent can try and sell a home, but it takes a true professional to market it correctly.
So, when is your first showing? As soon as the buyer clicks the mouse. Do you want that buyer to click on through to the next home, or stay on yours for a while and enjoy the view?
Most retail businesses have their customers enter through a main entrance. This entrance is attractive, easy to enter, and immediately lets the customer know what the store represents. They want you to feel at ease and like what you are about to see because as the old saying goes, “You only get one chance to make a good first impression”. Businesses know that if you walked in through the back door, you would most likely would turn around and walk right back out. Simple concept, right?
So why do I see so many home owners not thinking about the importance of a buyer’s first impression? I can’t tell you how many times I have walked into a home via a backdoor or garage. Trust me, it doesn’t start the showing off with a bang as usually the first thing the buyer sees is a basement door, mudroom, or kitchen. You don’t want them seeing your muddy shoes or kids backpack – you want them to see the beautiful foyer, grand staircase, or open floor plan. Even if you don’t use your front door, it is extremely important to have any potential buyer’s enter through it.
Buyers are pickyer than they have ever been, and they will quickly write off a home with just one small negative. Do yourself a favor, spruce up your front entrance and make the “window of your home” more presentable. It will give a better first impression to a buyer, and give you, the seller, a better chance of getting that offer you have been waiting for.
If you would like to see a real estate “Skinny” on the general real estate market for the Twin Cities, watch the video produced by the Minneapolis Association of Realtors, with an overall view on the health of the entire market.
